Campbell, whose shares were down 2 percent, said it was ontrack with a plan this year to spend $100 million on newadvertising, new products, and research and development meant toreignite soup sales that have gone cold amid increasedcompetition from store brands and other options such as frozenfoods.

Yet the company's increase in overall advertising is not assubstantial as it expected, since Campbell funneled some of itsad budget into promotions for baked goods, including itsPepperidge Farm Goldfish crackers.

Consumer spending on groceries -- and in particular, theones often found in the center of the store -- is under pressurein the United States as tightened budgets cause shoppers to bemore careful about what they buy.

What is more, U.S. sales of canned soup have diminished ineach of the last two years, according to EuromonitorInternational.

Yet Campbell has its own problems, seeing its share of theU.S. wet soup market lose 2.3 percentage points over the lastyear. The company said other brands gained share. One ofCampbell's key rivals is Progresso, owned by General Mills.

Campbell blamed price increases and fewer discounts for weakperformance in ready-to-serve soups. Part of the turnaroundstrategy of its new CEO Denise Morrison is to boost advertisingand reduce promotions.

"We have just hit the point of stabilization. I wouldn'tdeclare victory yet, but we are largely where we expected to beyear-to-date, despite the third quarter," Morrison said.

Campbell raised prices on condensed soups last year andplans another increase in June, the company said, as it seeks tooffset the impact of higher commodity costs.

While Campbell has taken the right steps to improve itsbusiness, those moves have yet to gain traction, saidMorningstar analyst Erin Lash.

"We didn't expect that their spending behind productinnovation and marketing support would yield measurableimprovements overnight, but obviously at some point we'd like tosee the volume declines gradually improve," Lash said.

PROFIT FALLS AS MARGINS SQUEEZED

Net income was $177 million, or 55 cents per share, for thefiscal third quarter ended April 29, down from $187 million, or57 cents per share, a year earlier.

The company benefited from a lower tax rate, and a declinein shares outstanding boosted per-share earnings.

The company's gross margin declined due to higher commoditycosts, promotional spending and sales of a greater number oflower-priced products. That contributed to a 13 percent declinein earnings before interest and taxes.

The company affirmed its full-year forecast for earnings pershare of $2.35 to $2.42, adjusted for one-time items, and netsales ranging from flat to up 2 percent. But it said salesshould be near the lower end of the range, while earnings shouldbe near the upper end, helped by a favorable tax rate.

Campbell shares were down 65 cents, or 2 percent, at $32.75on the New York Stock Exchange.